The CBDC Anti-Surveillance State Act, aimed at restricting the Federal Reserve's use of central bank digital currencies, passed the House on a partisan vote. The bill faces mixed reactions over privacy, innovation, and potential economic impacts.
The United States House of Representatives passed the CBDC Anti-Surveillance State Act on May 23, following a largely partisan debate. The bill, which now moves to the Senate, seeks to amend the Federal Reserve Act of 1913 to prohibit Federal Reserve banks from offering certain products or services directly to individuals and from using central bank digital currency (CBDC) for monetary policy.
The Republican-backed bill sparked a heated discussion, although attendance during the debate was sparse. Proponents of the bill raised concerns about potential abuses of CBDC technology, emphasizing privacy and governmental overreach, while opponents focused on innovation, the global competitiveness of the U.S. dollar, and criticized the bill's drafting.
French Hill, Chairman of the Financial Services Committee Subcommittee on Digital Assets, Financial Technology and Inclusion, underscored the dangers of governmental overreach, stating, “We live in a world where the government can abuse the tools it has.” Similarly, Representative Mike Flood used a rhetorical device, urging the audience to “imagine the politician you despise the most” with control over a CBDC.
Warren Davidson, a Financial Services Committee member, compared the New York Federal Reserve’s Project Hamilton to China’s digital yuan, describing it as “the same creepy surveillance tool.” He argued that the project could evolve into a more invasive form and insisted that the Federal Reserve respond to legislative constraints rather than informal discussions.
Echoing Davidson’s sentiments, Representative Alexander Mooney, who proposed an amendment to limit CBDC research, argued that a CBDC should not be developed hastily. He expressed concerns about its potential misuse, particularly referencing the Chinese digital yuan and Canada’s freezing of bank accounts during the trucker protests against COVID-19 vaccinations. Mooney also alluded to dystopian themes from George Orwell’s "1984," the Book of Revelations, and even the Death Star from the Star Wars franchise to underline his concerns.
Marjorie Taylor Greene added to the debate by warning about the “deep state” and a supposed “Democratic regime,” further polarizing the discussion.
However, the exact implications of the bill remain contentious. Brad Sherman dismissed it as a “word salad” favoring “crypto bros” and argued that no one would be compelled to use a CBDC. Meanwhile, Maxine Waters, the ranking member of the Financial Services Committee, contended that the bill’s language could be interpreted to prohibit a wholesale CBDC, which could undermine the global primacy of the U.S. dollar. She warned that the bill might also prevent the Federal Reserve from holding bank reserves, essential for administering payment systems, stating, “[The bill] blocks the American economy as it operates today and has for decades.”
Waters also highlighted the potential of zero-knowledge-proof technology to ensure user privacy, countering the privacy concerns raised by the bill's proponents. She further noted that while dollar-pegged stablecoins could lose value during a financial run, a CBDC would remain stable, providing a safer alternative.
Jake Auchincloss, another member of the Financial Services Committee, introduced a counterproposal, the "Power of the Mint Act," which he claimed would achieve similar objectives without the drawbacks of the current bill. However, his proposal was blocked by the Republicans.
Introduced by Representative Tom Emmer in February 2023, the CBDC Anti-Surveillance State Act passed the House by a vote of 216–192. As it moves to the Senate, it faces significant scrutiny and debate over its potential impact on privacy, innovation, and the stability of the U.S. financial system.
The outcome of this legislative effort will shape the future of digital currency regulation in the United States, reflecting broader concerns about privacy, governmental power, and the balance between innovation and security in the digital age.
(DEREK ANDERSEN, COINTELEGRAPH, 2024)